S&P Affirms RenRe’s ‘AA-‘/’A’ Ratings

April 19, 2005

Standard & Poor’s Ratings Services announced that it has affirmed its “AA-” counterparty credit and financial strength ratings on Bermuda-based Renaissance Reinsurance Ltd. (RenRe), its ‘A’ counterparty credit rating on RenaissanceRe Holdings Ltd. (RNR), and its ‘A’ counterparty credit and financial strength ratings on DaVinci Reinsurance Ltd.

S&P also said it has removed all these ratings from CreditWatch, where they were placed on Feb. 22, 2005, with negative implications. The outlook on RNR is negative, while the outlook on RenRe and DaVinci is stable.

S&P explained that it had placed the ratings on CreditWatch after RNR announced that it would restate its financial statements. “We have removed the ratings from CreditWatch and affirmed them because our concerns about the restatement–including potential reputational risk and meeting filing requirements–have been largely resolved and were minimal,” stated S&P credit analyst Damien Magarelli.

S&P said the current ratings are based on “RenRe’s very strong competitive position (including a leadership position in modeling catastrophe risks), very strong operating performance, and very strong financial flexibility.” The bulletin noted, however that in contrast “RNR is exposed to loss frequency and high loss severity because of the exposures it underwrites, including some concentrated exposures that could result in volatility. In 2004, RNR, the holding company, downstreamed roughly $280 million to replenish operating-company capital following the third-quarter 2004 hurricanes, which had a net income impact of $570 million.

“The result is that in the near-term, the holding company has a lower amount of liquid assets with which to support operating-company volatility.” S&P said it “expects volatility within RNR’s property catastrophe core line of business, but volatility outside property catastrophe reinsurance would be viewed with concern. The specialty and individual risk segments are expected to have very strong earnings in support of the ratings, and if unexpected adverse losses develop, the ratings will be reviewed.

“Furthermore, RNR is expected to grow within the specialty and individual risk segments in 2005, whereby these two segments will contribute more than 60 percent of gross premiums written in 2005.”

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